Income Tax in Nepal 2026: Rates, Slabs, Filing Deadlines & Deductions

Understanding income tax in Nepal is essential for both individuals and businesses. The Income Tax Act, 2058 (2002) governs the taxation of income in Nepal, administered by the Inland Revenue Department (IRD). This guide covers the current tax slabs, filing deadlines, available deductions, and the process for filing returns.

Nepal follows a progressive tax system where higher income is taxed at higher rates. The current tax slabs for resident individuals are:

First NPR 500,000: 1% (social security tax). NPR 500,001 to NPR 700,000: 10%. NPR 700,001 to NPR 1,000,000: 20%. NPR 1,000,001 to NPR 2,000,000: 30%. Above NPR 2,000,000: 36%.

For couples filing jointly, the tax-free threshold increases to NPR 600,000. Non-resident individuals are taxed at a flat rate of 25% on Nepal-sourced income.

General businesses: 25% on taxable profit. Banks and financial institutions: 30%. Special industries (manufacturing, export-oriented): 20%. Small businesses (turnover below NPR 10 million): reduced rates apply with simplified assessment.

Businesses in special economic zones may qualify for tax holidays and reduced rates under government incentive programs.

Life insurance premiums: Deductible up to NPR 40,000 annually. Retirement contributions: Employee's contribution to SSF/provident fund is deductible. Medical insurance: Premiums paid for health insurance are deductible up to NPR 20,000.

Donation to approved charitable organizations: Deductible up to 5% of adjusted taxable income. Depreciation on business assets: Computed under the declining balance method at prescribed rates.

Education expenses, home loan interest, and certain investment allowances may provide additional deductions depending on specific provisions.

Income tax returns must be filed within three months of the end of the fiscal year. Nepal's fiscal year runs from Shrawan 1 (mid-July) to Ashadh 31 (mid-July), so returns are due by the end of Kartik (mid-November).

Advance tax payments are due in three installments: by the end of Poush (mid-January), Chaitra (mid-April), and Ashadh (mid-July). Employers must deposit TDS within 15 days of the following month.

Late filing attracts a penalty of 0.1% of assessable income per month, plus interest at the prescribed rate on unpaid tax.

Step 1: Gather all income documents — salary slips, bank interest certificates, rental income records, business profit/loss statements, and TDS certificates.

Step 2: Calculate total income, apply deductions, and compute tax liability.

Step 3: File the return online through the IRD e-filing portal (ird.gov.np) or submit a physical return at the nearest IRD office.

Step 4: Pay any outstanding tax liability through bank deposit or online payment. Keep the tax payment voucher for your records.

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